OPP Trade blog: A look ahead to the EU/Australia FTA negotiations

Following Prime Minister Malcolm Turnbull’s meetings with various European leaders, One Policy Place takes a quick look at the upcoming Free Trade talks with Australia.

In Emmanuel Macron’s opinion there can be “no doubt that we can find a mutually beneficial agreement”; to Angela Merkel, Germany had “always been in favour” but for Europe’s farmers and their allies on the European Parliament’s agriculture committee; the enthusiasm of Europe’s most powerful leaders for a Free Trade Agreement with Australia is anything but delicious. Despite the French President’s warnings that agricultural concerns would have to be taken into account, considerable opposition can be expected when talks begin if the Commission pushes ahead with its most ambitious plans.

Leading the charge against any further liberalisation of EU agricultural markets will be Europe’s beef farmers. Already reeling from the potential of increased competition from the MERCOSUR deal, a further move by the Commission to reduce the barriers to imports would undoubtedly illicit a strong response. However it is not just the beef sector that may be concerned, liberalisation of trade would also be a worry to other sensitive sectors such as sugar, lamb or fruit production. Sugar in particular has had a difficult few years, with the ending of the EU’s production quotas having seen a rapid decrease in profitability. Though the EU impact assessment only envisages a small increase in total imports, given that Europe’s sugar beat farmers have struggled to adapt to the volatile world market there may be little appetite for any further pressure.

As the European Parliament’s AGRI Committee debate on harnessing globalisation highlighted, it won’t only be Europe’s farmers that Commissioner Malmström will find herself battling. Instead they can expect key support within Parliament itself as a certain shared scepticism over the benefits of FTAs appears to have taken hold in the Committee. In last week’s debate, MEPs from even the more free trade orientated groupings caveated their speeches with statements about the potential pitfalls of further deals and Parliament’s guidelines already warn of the need for protection for sensitive sectors.

However, as the Commission would be keen to point out, one man’s famine is often another man’s feast and there are considerable barriers to trade caused by the lack of any FTA. Key public procurement markets will undoubtedly be in the Commission’s sights and some European service companies are already pushing for their interests to be represented in this area. Car manufacturers also stand to gain as the failure to conclude a beneficial trade deal is not one shared by a number of Europe’s competitors. The US, Japan and South Korea have all managed to eliminate the 5% Australian tariff for cars, the Commission notes that this effectively means that only EU-produced automobiles are affected and this has reduced European competitiveness in the market.

Given the recent battles surrounding Mexico and Mercosur, it is tempting to suggest that the European Commission will choose to remove these sensitive products from the negotiation table in their entirety, however in any negotiation there must be some give and take, and within Australia there is already enthusiasm for a newly liberalised European market. Further to this, any negotiation is likely to take place in parallel to New Zealand talks and whereas Australia has a number of economic sectors which export heavily to the European Union, for its nearest neighbour over two thirds of all its trade is in agricultural goods. New Zealand will therefore be looking for some concessions in these sectors and any success will undoubtedly increase public pressure on the Australian government to secure similar terms.

Source: One Policy Place

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